Posts Tagged ‘Inflation’

I was a #Glee virgin until this season’s first episode. While I hate musicals I definitely enjoy Glee. It’s damn funny. But while we all drool over this season’s new offerings on t.v. the world does continue to fall apart. Brace yourselves for the real drama of living through yet another financial crisis…it’s coming… It’s not a mater of if but when….

Imagine trying to explain to a grandmother or a teenager that a lot of very clever people in the financial world don’t actually believe in dollars, euros and yen. Exchanging goods and services for bits of paper is a confidence game, say some; a conjuring trick without bones, because without the skeleton of a gold standard, so-called fiat currencies are worth nothing more than the paper they are printed on.

Even the majority of finance professionals who don’t see any need to back currencies with precious metals are haunted by the thought of the central bank printing presses whirring into action. And, with every nation in the world trying to export its way out of trouble, the beggar-thy-neighbor race to devalue currencies will only gather pace in the coming months.

When I’m 64

Folk wisdom claims that bumble bees defy the laws of physics because their power-to-weight ratio should be insufficient to allow flight. Luckily, because the bees don’t know this, they happily take off, buzz around and land, buoyed by blissful ignorance. Similarly, no sane investor would ever buy a stock or a bond if they stopped to consider the inverted- pyramid mathematics of an ageing, death-resistant population, a slump in birthrates, and the New Normal of spectacularly low returns in a post-bubble environment.

How on Earth is society going to pay pensions to this growing army of old people? If granddad does what investment theory says he should and socks his nest egg (assuming he even has one) into the ultra safety of Treasuries, earning a record- low yield of less than 0.45 percent on two-year securities, how will he afford his medications? Many countries and companies are probably bankrupt once you account properly for their future obligations; some problems, though, are too big and too intractable and too downright scary for polite conversation.